Thursday, January 28, 2021 / 03:47AM / By US SEC / Header Image Credit:
Federal Reserve is committed to using its full range of tools to support the
U.S. economy in this challenging time, thereby promoting its maximum employment
and price stability goals.
COVID-19 pandemic is causing tremendous human and economic hardship across the
United States and around the world. The pace of the recovery in economic
activity and employment has moderated in recent months, with weakness
concentrated in the sectors most adversely affected by the pandemic. Weaker
demand and earlier declines in oil prices have been holding down consumer price
inflation. Overall financial conditions remain accommodative, in part
reflecting policy measures to support the economy and the flow of credit to
U.S. households and businesses.
The path of the economy will depend significantly on
the course of the virus, including progress on vaccinations. The ongoing public
health crisis continues to weigh on economic activity, employment, and
inflation, and poses considerable risks to the economic outlook.
seeks to achieve maximum employment and inflation at the rate of 2 percent over
the longer run. With inflation running persistently below this longer-run goal,
the Committee will aim to achieve inflation moderately above 2 percent for some
time so that inflation averages 2 percent over time and longerâ€‘term inflation
expectations remain well anchored at 2 percent.
Committee expects to maintain an accommodative stance of monetary policy until
these outcomes are achieved. The Committee decided to keep the target range for
the federal funds rate at 0 to 1/4 percent and expects it will be appropriate
to maintain this target range until labor market conditions have reached levels
consistent with the Committee's assessments of maximum employment and inflation
has risen to 2 percent and is on track to moderately exceed 2 percent for some
addition, the Federal Reserve will continue to increase its holdings of
Treasury securities by at least $80 billion per month and of agency mortgageâ€‘backed
securities by at least $40 billion per month until substantial further progress
has been made toward the Committee's maximum employment and price stability
goals. These asset purchases help foster smooth market functioning and
accommodative financial conditions, thereby supporting the flow of credit to
households and businesses.
In assessing the appropriate stance of monetary
policy, the Committee will continue to monitor the implications of incoming
information for the economic outlook. The Committee would be prepared to adjust
the stance of monetary policy as appropriate if risks emerge that could impede
the attainment of the Committee's goals. The Committee's assessments will take
into account a wide range of information, including readings on public health,
labor market conditions, inflation pressures and inflation expectations, and
financial and international developments.
Voting for the monetary policy action were Jerome
H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W.
Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly;
Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.
Regarding Monetary Policy Implementation
Federal Reserve has made the following decisions to implement the monetary
policy stance announced by the Federal Open Market Committee in its statement on January 27, 2021:
- The Board of Governors of the Federal Reserve System voted
unanimously to maintain the interest rate paid on required and excess
reserve balances at 0.10 percent, effective January 28, 2021.
- As part of its policy decision, the Federal Open Market Committee
voted to authorize and direct the Open Market Desk at the Federal Reserve
Bank of New York, until instructed otherwise, to execute transactions in
the System Open Market Account in accordance with the following domestic
"Effective January 28, 2021, the
Federal Open Market Committee directs the Desk to:
- Undertake open market
operations as necessary to maintain the federal funds rate in a target
range of 0 to 1/4 percent.
- Increase the System Open
Market Account holdings of Treasury securities by $80 billion per month
and of agency mortgage-backed securities (MBS) by $40 billion per month.
- Increase holdings of Treasury
securities and agency MBS by additional amounts and purchase agency
commercial mortgage-backed securities (CMBS) as needed to sustain smooth
functioning of markets for these securities.
- Conduct repurchase agreement
operations to support effective policy implementation and the smooth
functioning of short-term U.S. dollar funding markets.
- Conduct overnight reverse
repurchase agreement operations at an offering rate of 0.00 percent and
with a per-counterparty limit of $30 billion per day; the
per-counterparty limit can be temporarily increased at the discretion of
- Roll over at auction all
principal payments from the Federal Reserve's holdings of Treasury
securities and reinvest all principal payments from the Federal Reserve's
holdings of agency debt and agency MBS in agency MBS.
- Allow modest deviations from
stated amounts for purchases and reinvestments, if needed for operational
- Engage in dollar roll and
coupon swap transactions as necessary to facilitate settlement of the
Federal Reserve's agency MBS transactions."
- In a related action, the Board of Governors of the Federal Reserve
System voted unanimously to approve the establishment of the primary
credit rate at the existing level of 0.25 percent.
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